Americas New Energy Future State Highlights Dec2012

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Americas New Energy Future:The Unconventional Oil and Gas Revolution

and the US Economy

Volume 2 State Economic Contributions

State Economic Contributions: Highlights

Prepared by:

IHS Inc.1150 Connecticut Avenue NW, Suite 401

Washington, DC 20036

December 2012


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About IHS (www.ihs.com)IHS (NYSE: IHS) ) is a leading source of information and insight in critical areas that shape todays businesslandscape, including energy and power; design and supply chain; defense, risk and security; environmental, healthand safety, and sustainability; country and industry forecasting; and commodities, pricing and cost. IHS has been inbusiness since 1959 and became a publicly traded company on the New York Stock Exchange in 2005.Headquartered in Englewood, Colorado, USA, IHS employs more than 5,100 people in more than 30 countriesaround the world.

About IHS CERAIHS CERA is a leading advisor to energy companies, consumers, financial institutions, technology providers andgovernments. The IHS CERA product suite covers all major energy sectors oil and refined products, natural gas,and electric power on a global and regional basis and delivers strategic knowledge and independent analysis onenergy markets, geopolitics, industry trends, and strategy.

About IHS Global InsightIHS Global Insight is one of the leading economic analysis and forecasting firms in the world, with an establishedtrack record for providing rigorous, objective data and forecast analysis to governments and businesses. Among itsareas of expertise are the economic impact, tax implications, and job-creation dynamics of multiple sectors core tonational, state and local economies. It also helps companies and governments at all levels interpret the impact ofproposed investments, policies, programs, and projects.

For more information, contact:

Richard F. FullenbaumVice President, Public Sector, IHS Consulting

[email protected]

John W. LarsonVice President, Public Sector, IHS Consulting

[email protected]

For press information, contact:

Jim DorseySenior Manager, Media Relations, IHS

[email protected] Marn

Senior Manager, Public Relations, [email protected]

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Key Definitions

Producing vs. Non-producing DefinitionsProducing states are defined as those that are part of the 20 largest unconventional oil and natural gasproducing plays in the US Lower 48, such as the Bakken and Marcellus Shale plays. Producing states

also include those states that are part of an emerging oil or natural gas play that is expected to havesizeable unconventional oil and/or natural gas production in the forecast horizon. The 16 producing statesare Arkansas, California, Colorado, Kansas, Louisiana, Mississippi, Montana, New Mexico, North Dakota,Ohio, Oklahoma, Pennsylvania, Texas, Utah, West Virginia, and Wyoming.

Non-producing states are not part of the 20 largest unconventional oil and natural gas producing playsin the US Lower 48 and are not part of an emerging oil or natural gas play in the 2012 to 2035 forecasthorizon. These states may be part of plays that are currently producing oil and/or natural gas, butnevertheless are classified as non-producing states because current production is relatively small and theprospect for future unconventional production is unknown. The 32 non-producing states are Alabama,

Arizona, Connecticut, Delaware, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kentucky, Maine,Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nebraska, Nevada, New Hampshire, NewJersey, New York, North Carolina, Oregon, Rhode Island, South Carolina, South Dakota, Tennessee,Vermont, Virginia, Washington and Wisconsin. Some of these may over time move into the producing

states category.

It is also important to note that the current policies of state governments toward unconventional oil andnatural gas production are assumed to continue through the forecast horizon. For example, the currentpolicy against unconventional oil and natural gas production in the state of New York is assumed tocontinue; as a consequence New York is considered a non-producing state in this study. It is recognized,however, that this could change at some point.

Finally, states like California, which is anticipated to have unconventional oil production from theemerging Monterey Formation but has no current production, may make major economic contributions.While significant unconventional oil production in California is not expected to begin until late in theforecast period, the large volume of its goods and services that feed into the unconventional oil andnatural gas supply chain make California one of the largest producing states in terms of employment,government revenues and value-added.

Activity Type DefinitionsUnconventional natural gas activity represents the production of gas and liquids recovered from shalegas and tight gas plays.

Unconventional oil activity represents the production of oil and associated gas recovered from tight oilplays.

Total unconventional activity represents the sum of unconventional gas activity and unconventional oilactivity.


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TABLE OF CONTENTS

Producing States......................................................................................................................................... 6

ARKANSAS ........... ........... .......... ........... .......... ........... ........... .......... ........... ........... .......... ........... ........... .......... ..........7

CALIFORNIA .............................................................................................................................................................9COLORADO ............................................................................................................................................................12KANSAS ..................................................................................................................................................................14LOUISIANA..............................................................................................................................................................16MISSISSIPPI ...........................................................................................................................................................18MONTANA...............................................................................................................................................................20NEW MEXICO .........................................................................................................................................................22NORTH DAKOTA ....................................................................................................................................................24OHIO .......................................................................................................................................................................27OKLAHOMA ............................................................................................................................................................30PENNSYLVANIA .....................................................................................................................................................33TEXAS.....................................................................................................................................................................36UTAH.......................................................................................................................................................................39WEST VIRGINIA......................................................................................................................................................41

WYOMING...............................................................................................................................................................43

Non-Producing States ..............................................................................................................................45

ALABAMA............ ........... .......... ........... ........... .......... ........... ........... .......... ........... ........... .......... ........... .......... .......... 46ARIZONA............... ........... .......... ........... ........... .......... ........... .......... ........... ........... .......... ........... ........... .......... ........48CONNECTICUT.......................................................................................................................................................50DELAWARE.............................................................................................................................................................52FLORIDA .................................................................................................................................................................54GEORGIA ................................................................................................................................................................56IOWA .......................................................................................................................................................................58IDAHO .....................................................................................................................................................................60ILLINOIS ..................................................................................................................................................................62INDIANA..................................................................................................................................................................64KENTUCKY .............................................................................................................................................................66

MAINE .....................................................................................................................................................................68MARYLAND.............................................................................................................................................................70MASSACHUSETTS.................................................................................................................................................72MICHIGAN...............................................................................................................................................................74MINNESOTA ...........................................................................................................................................................76MISSOURI...............................................................................................................................................................78NEBRASKA .............................................................................................................................................................80NEVADA..................................................................................................................................................................82NEW HAMSPHIRE ..................................................................................................................................................84NEW JERSEY .........................................................................................................................................................86NEW YORK .............................................................................................................................................................88NORTH CAROLINA.................................................................................................................................................90OREGON.................................................................................................................................................................92RHODE ISLAND......................................................................................................................................................94

SOUTH CAROLINA.................................................................................................................................................96SOUTH DAKOTA ....................................................................................................................................................98TENNESSEE .........................................................................................................................................................100VIRGINIA ...............................................................................................................................................................102VERMONT.............................................................................................................................................................104WASHINGTON......................................................................................................................................................106WISCONSIN..........................................................................................................................................................108


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PRODUCING STATES


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ARKANSAS

OVERVIEWIn 2012, Arkansas economy has begun to gradually recover from the recession. Although private-sector

job growth has been weak, one of Arkansas' strengths is its large government sector, which is

responsible for nearly one-fifth of total employment and which continued adding jobs even through therecession. The state government was able to maintain such high job growth, because its financial statusis healthy compared with many other states that have budgets in deep deficit. Contributing significantly tothe states bottom line has been oil and gas revenue: Arkansas reaped $530 million in state and localtaxes from unconventional oil and gas activity in 2012, helping in turn to boost government payrolls. Theoil and gas industry has thus been a significant factor in the states return to economic health.

In 2012, the state marked the first year of positive job growth since 2007, providing a much-needed shotin the arm for the state's economy. The Natural State's employment growth will build momentum in thenear term, averaging 1.4% gains per year from 2012 through 2017. Since Arkansas also did not suffer thesame magnitude of job losses as the rest of the country during the recession, the state does not requireas strong of a recovery to return to its pre-recession level. Indeed, we expect Arkansas' employment toregain its 2008 peak by 2014, around the same time as the nation as a whole.

CONTRIBUTION OF UNCONVENTIONAL OIL AND GASArkansas produced 17,000 barrels of crude oil per day in August 2012, according to the EnergyInformation Administration. However, this is primarily a gas-producing state, with most of the oil beingproduced in conjunction with gas production. The Fayetteville Shale gas play, which began production in2006, is contributing 2.6 billion cubic feet per day (bcf/day) of gas. In 2012, the state spent over $2.6billion on unconventional gas, and spending is expected to increase steadily in coming years. In 2022,

Arkansas will continue to be a significant producer of shale gas as the Fayetteville Shale gas play isexpected to increase production to 3 bcf/day. Additionally, the states access to specific naturalresources, supplier networks, and trade flows indirectly creates jobs. For example, Arkansas is one of thefew states that produces special sand required for hydraulic fracturing, a process used to extract tight oiland gas. With this competitive advantage, Arkansas will be a strong exporter of this special sand foryears to come.

In 2012, the economic activity associated with unconventional oil and gas directly and indirectly supportedover 33,000 jobs in the state, or 3% of the states total nonfarm employment 1. Unconventional oil- andgas-related employment is expected to increase to 52,500 by 2020 and to 56,000 by 2035. These jobswould employ 3.6% of the state labor force by 2035, helping to reduce unemployment and creating asteady source of payroll growth for the next two decades.

Unconventional oil and gas activity contributed value-added economic activity of $3.8 billion in Arkansasin 2012. We forecast that this contribution will grow to nearly $7 billion by 2035. As for labor income, theaverage annual wage in Arkansas in 2012 is $46,700, while the average wage of direct jobs inunconventional oil and gas activity is significantly higher, at $83,800, providing a solid quality of life forstate residents employed by the industry.

Unconventional oil and gas activity is also a major source of revenues for the state government inArkansas. In 2012, it generated over $1 billion in taxes for state and federal coffers. This includes $530million in state and local taxes, or the equivalent of about 7% of the states $7.7 billion budget for 2012.Tax revenues generated by unconventional oil and gas activity would help the state significantly reduceits current budget deficit.

1Direct jobs are those created by firms that comprise the oil and gas industry, or by the capital expenditures of related industries;

indirect jobs are those created by suppliers of goods and services to industry. Induced jobs are those that meet the new demand forconsumer goods created by the increased income generated by the direct and indirect jobs.


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Employment(Number of workers)

Direct Indirect Induced Total

2012 11,933 8,661 12,506 33,100

2020 18,277 14,116 20,146 52,5392035 18,498 15,795 22,125 56,418

Value Added(2012 $M)


2012 2,149 823 847 3,818

2020 3,594 1,364 1,451 6,409

2035 3,708 1,561 1,608 6,876

Labor Income(2012 $M)


2012 1,000 511 499 2,0102020 1,677 844 814 3,335

2035 1,822 952 900 3,674

Source: IHS Global Insight

($M)2012 2020 2035 2012-2035*

Federal Taxes 474 789 852 16,829

Personal Taxes 356 590 652 12,655

Corporate Taxes 109 185 193 3,897

Federal Royalty Payments 8 14 8 264

Federal Bonus Payments 1 1 0 13

State and Local Taxes 530 900 829 18,707

Personal Taxes 71 116 111 2,412


Severance Taxes 126 227 229 5,009

Ad Valorem Taxes 38 68 45 1,345

State Royalty Payments 1 3 1 50

State Bonus Payments 0 0 0 3

Total Government Revenue 1,003 1,689 1,681 35,536

Lease Payments to Private Landowners 7 9 21 241

NOTES: *2012-2035 represents the total for all years including those years not reported.


Contribution of Total Unconventional Oil and Gas Activity to Gove rnment Reve nue and Private Lease

Payments: Arkansas

Arkansas Economic Contribution Summary: Total Unconventional O il and Gas Activity

NOTES: Numbers may not sum due to rounding.


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CALIFORNIA

OVERVIEWIn 2012, payrolls in California expanded at a moderate but steady pace. During 2011, the states payrolls

grew 1.2% as it added nearly 168,000 jobs and became the second-largest source of new jobs in thecountry after Texas. Thanks to renewed hiring, the unemployment rate retreated to 10% by the end of2012, down more than 2 percentage points from the end of 2010. While a marked improvement, this isstill a very high rate, and California remains one of only three states with double-digit unemployment.However, oil and gas jobs have been a significant factor in the states return to economic health,particularly as a source of tax revenues. Californias budget woes are well known, and state and localcoffers received $1.6 billion from unconventional oil and gas in 2012. We expect the California economyto continue to grow at a moderate pace during 2013, though not by enough to significantly offset theincrease in the labor force, as previously discouraged workers renew their job searches. As a result, weexpect the unemployment rate will not dip below the double-digit range until 2014. During its recovery,California will once again be the target for venture-capital investment seeking high returns, because of itshighly educated workforce. Alternative-energy technologies, aided in part by government subsides, arealso expected to play a part in the recovery, and California is well positioned to benefit from each industry

segment (research, design, and manufacturing). From 2013-2018, we expect the Golden State to registersolid 1.6% average annual job growth, matching the US average. In a testament to the severity ofCalifornias recession, the state will not regain all the jobs lost in the recession until 2015 a year afterthe national average returns to its peak.

CONTRIBUTION OF UNCONVENTIONAL OIL AND GASThe state has produced 530,000 barrels per day of crude oil in July 2012, according to the EnergyInformation Administration (EIA). This level of production makes California the third largest producer ofcrude oil in the United States, right behind North Dakota.

The Monterrey Formation has produced oil and gas for the past several decades from many reservoirs ina wide variety of geologic settings. While some in the industry argue that some of the historicallyproducing plays within the Monterrey could be classified as unconventional, the successful large-scaleapplication of unconventional technology has not been implemented on a regional basis; therefore IHS

considers currently producing plays to be conventional. A number of unconventional tight oil possibilitiesassociated with the Monterrey Formation have been identified and are currently being investigated. Thusfar, producers have not been able to un-lock the vast potential resources that reside in what would beconsidered the unconventional or tight members of this formation. IHS believes that within the nextdecade, operators are going to be able to figure out how to produce these reservoirs and has includedthis within its unconventional forecast beginning in 2022.

The economic activity associated with unconventional oil and gas produced in other states supportednearly 100,000 jobs in the state in 2012, mostly in the industrial and chemical manufacturing sectors. Thisnumber represents 8% of the states total manufacturing jobs[1].

The states unconventional oil and gas-related employment is expected to increase 50% to 153,000 jobsby 2020, and to increase to 187,000 by 2035. These 187,000 jobs would employ nearly 1% of the state

labor force by 2035, helping to reduce unemployment and creating a steady source of payroll growth forthe next two decades.

Unconventional oil and gas activity contributed value-added economic activity of $10.4 billion in Californiain 2012. We forecast that this contribution will grow to $21.6 billion by 2035. As for labor income, theaverage annual wage in California in 2012 is $66,700, while the average wage of direct jobs in

[1] Direct jobs are those created by firms that comprise the oil and gas industry, or by the capital expenditures of related industries;indirect jobs are those created by suppliers of goods and services to industry. Induced jobs are those that meet the new demand forconsumer goods created by the increased income generated by the direct and indirect jobs.


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unconventional gas activity is much higher, at $82,400, providing a strong quality of life for state residentsemployed by the industry.

Another contribution of unconventional gas employment is to government revenues. In 2012, it generatednearly $3 billion in taxes for state and federal coffers. This includes over $1.6 billion in state and localtaxes, or the equivalent of 1.4% of the states $117 billion budget and almost exactly the amount ofrevenues raised by alcohol and tobacco taxes in 2012. California currently faces a budget deficit of $16billion, and the revenues generated by unconventional gas activity are equivalent to nearly 10% of thedeficit.


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2012 6,480 33,337 56,737 96,553

2020 7,910 53,150 92,598 153,6582035 13,120 63,502 110,647 187,270



2012 751 4,094 5,610 10,455

2020 1,124 6,737 8,786 16,647

2035 2,806 8,262 10,563 21,631



2012 534 2,579 3,152 6,2652020 740 4,171 5,174 10,085

2035 1,518 5,013 6,154 12,686


($M)2012 2020 2035 2012-2035*

Federal Taxes 1,363 2,178 2,895 52,090

Personal Taxes 1,111 1,783 2,251 41,831

Corporate Taxes 252 395 539 9,558Federal Royalty Payments 0 0 105 698


State and Local Taxes 1,623 2,437 2,878 56,292

Personal Taxes 463 693 725 15,418

Corporate Taxes 1,160 1,743 2,119 40,653

Severance Taxes 0 0 3 19

Ad Valorem Taxes 0 0 22 147







Contribution of Total Unconventional Oil and Gas Activity to Gove rnment Re venue and Private Lease

Payments: California

California Economic Contribution Summary: Total Unconventional Oil and Gas Activity



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COLORADO

OVERVIEWColorado is one of the few states that continually added jobs in 2012, led by impressive gains in the

construction, natural resources, and mining sectors. The natural resources and mining sector is getting aboost from the housing recovery and from increasing development of Colorados oil and gas resources.The states burgeoning renewable-energy sector, which has featured significant growth in jobs andeconomic activity from the manufacture of solar- and wind energy-production equipment, has come onhard times due to the looming expiration of wind and solar tax credits. But Colorado is having bettersuccess than most states in maintaining public-sector jobs at both the state and local government levels.Many of these jobs are in public school education, which relies on state and local taxation for funding.The oil and gas industry is a factor here, and the tax revenues generated by unconventional oil and gasemployment alone reached $1.4 billion in 2012.

Employment growth in Colorado will rank near the top of all the states during 2012-2017. Coloradoseconomy will benefit from several advantages, including abundant energy reserves, a growing and well-educated labor force, and a relatively low cost of living. Professional and business services and thehealthcare sector will both grow robustly, but the construction sector will see the fastest growth, with the

bulk of its gains seen in 2014-2016 as the housing recovery reaches full steam.

CONTRIBUTION OF UNCONVENTIONAL OIL AND GASColorado is playing a major role in the nations resurgence as an on-shore oil and gas producer, withconventional production being greatly augmented by unconventional production facilitated through theuse of horizontal drilling and hydraulic fracturing. The state has abundant resource of oil and gas in shaleand tight sands within three basins, but the Niobrara play in the Denver basin is currently the most active.Horizontal drilling within the basin has revitalized the play with anticipated increases in future production.Gas production from the San Juan Basin located in the southwest part of the state is in decline. In 2012,unconventional tight gas production from the Piceance Basin located in the northwest part of the statehas also declined somewhat due to the drop in natural gas prices, but activity there is expected to resumeas prices stabilize. In addition, supplier networks, trade flows and income effects from earnings related tounconventional oil and gas also create a significant number of jobs here. The economic activity

associated with unconventional oil and gas directly and indirectly supported over 77,000 jobs in the statein 2012, with many of these jobs in construction and manufacturing at relatively high wages.2

The states unconventional oil- and gas-related employment is expected to increase to over 121,000 jobsby 2020 and to 175,300 by 2035. These jobs would employ 4.9% of the state labor force by 2035, helpingto reduce unemployment and creating a steady source of payroll growth for the next two decades.

Unconventional oil and gas activity contributes value-added economic activity of over $11 billion inColorado in 2012. We forecast that this contribution will grow to over $26 billion by 2035. As for laborincome, the average annual wage in Colorado in 2012 is $60,600, while the average wage of direct jobsin unconventional oil and gas activity is $116,000, which helps to boost the average income of stateresidents employed by the industry.

There is also the contribution of unconventional oil and gas employment to government revenues. InColorado in 2012, it generated nearly $3 billion in taxes for state and federal coffers. This includes over$1.4 billion in state and local taxes, or the equivalent of 15% of the states 2011 tax revenues.

2 Direct jobs are those created by firms that comprise the oil and gas industry, or by the capital expenditures of related industries;indirect jobs are those created by suppliers of goods and services to industry. Induced jobs are those that meet the new demand forconsumer goods created by the increased income generated by the direct and indirect jobs.


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2012 23,737 21,555 32,329 77,622

2020 34,775 34,064 52,559 121,3982035 48,818 49,944 76,601 175,363



2012 6,206 2,699 2,742 11,647

2020 8,601 4,327 4,678 17,605

2035 13,575 6,301 6,799 26,675



2012 2,755 1,612 1,534 5,9012020 3,971 2,562 2,521 9,054

2035 6,232 3,746 3,644 13,622


($M)2012 2020 2035 2012-2035*

Federal Taxes 1,486 2,312 3,460 58,355

Personal Taxes 1,046 1,601 2,416 40,303


Federal Royalty Payments 94 196 258 4,960




Corporate Taxes 725 1,051 1,413 25,617






Lease Payments to Private Landowners 20 33 73 1,065



Contribution of Total Unconventional Oil and Gas Activity to Gove rnment Re venue and Private Le ase

Payments: Colorado

Colorado Economic Contribution Summary: Total Unconventional Oil and Gas Activity



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KANSAS

OVERVIEWKansas' economy continued to move slowly in the right direction in 2012. Progress has been tepid as

Chinas economic slowdown and layoff announcements in the aerospace manufacturing sector,particularly by firms such as Boeing and Hawker-Beechcraft have impeded more robust growth. As aresult, Kansas has added fewer than half of the 73,000 jobs lost during the recession when employmentbottomed out in the first quarter of 2010. The unemployment situation in Kansas has been improving atan equally meager pace amid sluggish recovery. The jobless rate has inched down only about 1percentage point in the past two years, and the pre-recession peak employment level will not be met untillate 2014. Our 2013 forecast calls for growth in the Kansas economy to be slightly below the nationalaverages in employment, real gross state product (GSP), and real personal income during 2013. Weanticipate much of the same through 2017. Instrumental to the states healing process will be not just theaerospace manufacturing the state is known for, but also the services sectors and the unconventional oiland gas industry, where jobs will double during the five-year forecast period.

CONTRIBUTION OF UNCONVENTIONAL OIL AND GASKansas currently ranks 8th in the nation in natural gas production, thanks largely in part to the HugotonNatural Gas Field, the nations fifth-largest gas field. Even though Hugotons production has declined,there has been some limited coal bed methane activity in the Cherokee Platform. Associated gas from oilproduction also contributes to the gas total in a state that is also responsible for 2% of the nations oilproduction. Currently, the Mississippian Lime is the preeminent unconventional oil play in Kansas,stretching some 17 million acres through the southern part of the state and into northern Oklahoma. Thisemerging play is still being delineated but may hold between 5.4 and 5.9 billion barrels of commerciallyrecoverable oil equivalent. The economic activity associated with unconventional oil directly and indirectlysupport over 11,000 jobs in the state in 2012, mostly in the construction, steel manufacturing andmachinery manufacturing 3.

The states unconventional oil-related employment is expected to more than double to over 25,000 jobsby 2020, and to quadruple to 44,000 by 2035. These jobs would employ 2.5% of the states labor force by2035, helping to reduce unemployment and creating a steady source of payroll growth for the next two

decades.Unconventional gas activity contributed value-added economic activity of $1.1 billion in Kansas in 2012.We forecast that this contribution will grow to $5.8 billion by 2035. As for labor income, the averageannual wage in Kansas in 2012 is $54,900, while the average wage of direct jobs in unconventional oilactivity is $72,500, providing a solid quality of life for state residents employed by the industry.

There is also the contribution of unconventional gas employment to government revenues. In Kansas in2012, it generated over $250 million in taxes for state and federal coffers. This includes $100 million instate and local taxes, or the equivalent of 1.5% of the state budget.

3Direct jobs are those created by firms that comprise the oil and gas industry, or by the capital expenditures of related industries;indirect jobs are those created by suppliers of goods and services to industry. Induced jobs are those that meet the new demand forconsumer goods created by the increased income generated by the direct and indirect jobs.


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2012 2,070 3,196 5,765 11,032

2020 6,228 7,061 12,051 25,3402035 12,578 12,286 19,095 43,959



2012 300 375 508 1,183

2020 1,345 806 999 3,150

2035 2,951 1,363 1,538 5,853



2012 150 227 282 6592020 533 490 567 1,589

2035 1,215 832 864 2,911


($M)2012 2020 2035 2012-2035*

Federal Taxes 151 391 741 10,635











Total Government Revenue 251 731 1,471 20,686


NOTES: *2012-2035 represents the total for all years including those years not reported.Source: IHS Global Insight

Contribution of Total Unconventional Oil and Gas Activity to Gove rnment Revenue and Private Lease

Payments: Kansas

Kansas Economic Contribution Summary: Total Unconventional Oil and Gas Activity



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LOUISIANA

OVERVIEWAfter expanding 2% during 2011, Louisiana surpassed its pre-recession peak employment level in

February 2012. In early 2012, Louisiana moved from recovery to expansion, boosted by growth in mining,information and services. Oil and gas jobs have been a significant factor in the states return to economichealth, both in terms of jobs and tax revenues generated. With oil prices falling from their highs in early2012, payroll expansion in the mining sector slowed during 2012, but it continued to have a positiveimpact on the states bottom line throughout the year. During 2013, we expect Louisianas economy tocontinue its current, moderate expansion. Despite continued growth in private payrolls, a rising labor forcewill prevent a significant improvement in the unemployment rate, which will remain above 7% through theend of 2013. Job growth will accelerate, however, and will peak at a rate of 1.5% in 2015.

CONTRIBUTION OF UNCONVENTIONAL OIL AND GASLouisiana is rich in crude oil and natural gas, both conventional and unconventional, with an abundanceof deposits onshore and in near-shore waters. Vast crude oil and natural gas reserves exist offshore inthe federally administered Outer Continental Shelf (OCS) in the Gulf of Mexico. Support activities for

harvesting this vast offshore resource are located primarily within this state. The Gulf of Mexicos OCS ishome to many of the nations largest oilfields and is the largest oil-producing region in the United States.Louisiana ranks fourth in the nation in terms of crude oil production, and its crude oil reserves account forabout 2% of the US total. It is also the second-largest natural-gas-producing state in the country, withabout 8.3 bcf/day, according to the Energy Information Administration. Production from the state this yearhas declined from its 2011 level of 9.0 bcf/day. In 2011, the Haynesville, a primary unconventional shalegas play increased production to nearly 7 bcf/day. Since mid-2011, however, drilling in the play hascooled amid a drop in natural gas prices as producers have moved operations to wet gas plays outsidethe state that have a higher amount associated liquids. Consequently, production has leveled off. Inaddition, declining conventional production has accounted for the recent employment drop in this sector.

As gas prices firm, some recovery in the Haynesville is anticipated.

The economic activity associated with unconventional gas directly and indirectly supported nearly 79,000jobs in the state in 2012.4 These jobs will rise to nearly 151,000 by 2035, or 7.1% of the states labor

force, helping to reduce unemployment and creating a steady source of payroll growth for the next twodecades.

Unconventional gas activity contributed value-added economic activity of $10.7 billion in Louisiana in2012. W e forecast that this contribution will grow to $19.7 billion by 2035. As for labor income, theaverage annual wage in Louisiana in 2012 is $57,600, while the average wage of direct jobs inunconventional gas activity is much higher, at $108,700, providing an enormous boost to quality of lifeand family income for state residents employed by the industry.

There is also the contribution of unconventional gas employment to government revenues in Louisiana. In2012, it generated over $2.5 billion in taxes for state and federal coffers. This includes over $1.2 billion instate and local taxes, or the equivalent of 14% of the states total budget.



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2012 24,314 25,511 29,142 78,968

2020 27,377 30,313 39,728 97,4182035 49,076 44,590 57,237 150,903



2012 5,739 2,830 2,157 10,727

2020 6,106 3,544 3,180 12,829

2035 10,053 5,145 4,520 19,718



2012 2,642 1,746 1,240 5,6272020 2,520 2,083 1,732 6,335

2035 4,094 3,027 2,431 9,553


($M)2012 2020 2035 2012-2035*

Federal Taxes 1,315 1,525 2,323 39,259

Personal Taxes 998 1,121 1,694 28,780





Corporate Taxes 819 1,019 1,400 25,367



State Royalty Payments 94 144 190 3,681

State Bonus Payments 43 46 54 1,166



NOTES: *2012-2035 represents the total for all years including those years not reported.Source: IHS Global Insight

Contribution of Total Unconventional Oil and Gas Activity to Government Rev enue and Private Lease

Payments: Louisiana

Louisiana Economic Contribution Summary: Total Unconventional Oil and Gas Activity



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MISSISSIPPI

OVERVIEWMississippi experienced another year of anemic job growth in 2012. While the nation as a whole has

made significant strides in its post-recession recovery, Mississippi has recovered only a small fraction ofthe thousands of jobs it lost during the recession. Mississippi's unemployment rate was 8.9% in late 2012,nearly a full percentage point higher than the national rate. With its labor market in such a dire situation,unemployment remains a challenge. However, there are signs of hope. Developments at the Toyota,Northrop Grumman, and GE Aviation plants are expected to buttress the transportation equipment sectorin coming years. Mississippi's transportation and warehousing sector is also expected to surge in thefuture as the state invests in its ports, positioning itself to benefit from the widening of the Panama Canal.Oil and gas jobs if the development of the Tuscaloosa Marine Shale and other unconventional playscome to fruition would be a significant shot in the arm to the state economy. Employment in Mississippiis currently projected to grow at about the national average over the medium term, but the Magnolia Statewill not recoup all of its recessionary job losses until 2017, three years after the nation as a whole. Most ofthe state's growth will come from the professional and business services sector and construction, ashousing starts pick up and demand for residential and commercial real estate grows. Mississippis

manufacturing sector, after a decade of nearly continuous decline, began to pick up in 2012 and willcontinue to grow for the next four years. Transportation equipment manufacturing in particular is expectedto surge for the next four years: new Toyota and GE plants will help fuel the sector's recovery. Despite theeconomic progress anticipated in the future, unemployment will remain a challenge for Mississippi. Theunemployment rate is not expected to return to its pre-recession trough in the foreseeable future. It willsink to 7.4% in 2017 that decline will be slower than in most other states.

CONTRIBUTION OF UNCONVENTIONAL OIL AND GASMississippi currently produces oil and is expected to start producing both shale and tight gas in the nearfuture, if the Tuscaloosa Marine Shale and other emerging unconventional play materialize. The stateproduced 64,000 barrels of crude oil per day in August 2012, according to the Energy Information

Administration. The economic activity associated with unconventional oil and gas directly and indirectlysupports more than 5,000 jobs in the state in 2012, which represents 0.5% of the states total nonfarmemployment5. The unconventional oil- and gas-related employment is expected to surge to 8,900 by 2020

and to 22,400 by 2035. These jobs would employ 1.6% of the state labor force by 2035, helping to reduceunemployment and creating a steady source of payroll growth for the next two decades.

Unconventional oil and gas activity contributed value-added economic activity of $510 million inMississippi in 2012. We forecast that this contribution will grow to $2.8 billion by 2035. As for laborincome, the average annual wage in Mississippi in 2012 is $45,800, while the average wage of jobs inunconventional oil and gas activity is significantly higher at $59,000, providing a solid quality of life forstate residents employed by the industry.

There is also the contribution of unconventional oil and gas to government revenues. In 2012, itgenerated $161 million in taxes for state and federal coffers. This includes $93 million in state and localtaxes, or the equivalent of about 1.4% of the states $5.5 billion budget for 2012. Tax revenue generatedby unconventional oil and gas activity would help the state reduce its current budget deficit.



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2012 0 1,601 3,481 5,082

2020 3 2,786 6,099 8,8872035 4,969 6,256 11,216 22,441



2012 0 194 316 510

2020 1 342 517 860

2035 1,328 628 856 2,811



2012 0 120 180 3002020 0 211 316 527

2035 542 386 496 1,424


($M)2012 2020 2035 2012-2035*

Federal Taxes 68 117 343 3,867


Corporate Taxes 12 21 82 811Federal Royalty Payments 0 0 0 0



Personal Taxes 8 14 31 400


Severance Taxes 0 0 117 720








Contribution of Total Unconventional Oil and Gas Activity to Gove rnment Re venue and Private Lease

Payments: Mississippi

Mississippi Economic Contribution Summary: Total Unconventional O il and Gas Activity



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MONTANA

OVERVIEWAfter experiencing small employment declines for nearly a year, Montana in late 2012 returned to

employment growth, and we expect Montana's economy to see robust gains in 2013. . Much of thiseconomic resurgence was due to oil jobs: Eastern Montana has been participating in the Bakken oil boomin neighboring North Dakota, specifically providing refining, exploration, and administrative and supportservices. And with the Bakken play set to expand, Eastern Montana is expected to see continuedemployment gains. The states construction sector boomed in 2012 because of tremendous growth innew housing construction, much of that to fill demand around the Bakken play. Natural resources-miningand business support services, along with the rising real estate and construction sectors, will propel jobgrowth, and the unemployment rate should slip below 6% in 2013. Through 2018, Montana's employmentgrowth will decelerate, however, averaging about 1.6% annually, as the lack of economic diversity limitsthe states expansion. Real income growth will slightly lag the national pace during 201218, and realoutput growth will be slightly lower than the nation by then as well. Employment will regain pre-recessionlevels around the beginning of 2015. Montana's wealth of natural resources, abundant touristdestinations, and growing need for services geared toward the elderly helped the state overcome its lack

of industrial diversity during the national recession; however, we expect Montana to grow at a slightlyslower pace than the country during the recovery. Employment will regain pre-recession levels around thebeginning of 2015. Montana's employment growth, at 1.6%, will run at a slower pace than the nationsduring 20122018.

CONTRIBUTION OF UNCONVENTIONAL OIL AND GASMontana does not currently produce unconventional gas, but it is home to significant oil activity. Montanaproduced 70,000 barrels per day of crude oil in July 2012, or about 1% of total US production, accordingto the Energy Information Administration. The economic activity associated with unconventional gasdirectly and indirectly supported over 9,600 jobs in the state in 2012 mostly in drilling oil and gas wells,and the manufacturing and support activities that support it.6 Unconventional gas-related employment isexpected to increase to just over 16,700 jobs by 2020 and to over 18,800 by 2035. These jobs wouldemploy 3.2% of the state labor force by 2035, helping to reduce unemployment and creating a steadysource of payroll growth for the next two decades.

Unconventional gas activity contributed value-added economic activity of $1.2 billion in Montana in 2012.We forecast that this contribution will grow to $2.7 billion by 2035. As for labor income, the averageannual wage in Montana in 2012 is $46,000, while the average wage of direct jobs in unconventional gasactivity is more than double that amount, at $104,000, providing strong quality of life for state residentsemployed by the industry.

There is also the contribution of unconventional gas employment to government revenues. In Montana in2012, it generated over $511 million in taxes for state and federal coffers. This includes $360 million instate and local taxes, or the equivalent of 16% of the states current budget.



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2012 2,615 2,687 4,332 9,634

2020 4,584 4,737 7,478 16,7992035 4,933 5,432 8,445 18,811



2012 695 264 301 1,260

2020 1,517 478 544 2,539

2035 1,557 551 619 2,728



2012 271 147 168 586

2020 528 263 294 1,085

2035 595 306 336 1,237


($M)2012 2020 2035 2012-2035*

Federal Taxes 150 289 321 6,622

Personal Taxes 104 192 220 4,425Corporate Taxes 41 88 90 1,950




Personal Taxes 27 44 40 953








NOTES: *2012-2035 repres ents the total for all years including thos e years not reported.


Contribution of Total Unconventional Oil and Gas Activity to Government Revenue and Private Lease

Payments: Montana

Montana Economic Contribution Summary: Total Unconventional Oil and Gas Activity



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NEW MEXICO

OVERVIEWNew Mexico, which had become an attractive target for relocation by homeowners, especially retirees,

during the economic boom, was hit hard by the housing crisis and is now working through a backlog offoreclosures. The energy and leisure-hospitality sectors have been the main drivers of the economy sincethe end of the recession. With oil prices coming down from their early-2012 highs, growth in the energysector has slowed, but it remains a major source of employment and government revenues. The SanJuan Basin in the northwest corner of the state is a heavy producer of conventional gas and coal-bedmethane. Low natural gas prices have recently kept drilling activity in this area depressed, but thesoutheast corner of the state is part of the Permian Basin, where oil-directed drilling was booming thanksto high prices. The New Mexico economy should begin to turn around in 2013. Job growth will be drivenby the continued expansion of the leisure-hospitality and trade-transportation sectors, as well as a much-awaited turnaround in professional-business services and construction. Despite renewed hiring, the returnof previously discouraged workers to the workforce will keep the unemployment rate above 6% until theend of 2014. Between 2013 and 2018, payrolls led by the professional-business services sector and,finally, the much-awaited turnaround in the construction sector are expected to expand by 1.6%

annually, matching average US growth during this period. Due to recent weakness, though, New Mexicois not expected to reach its prerecession peak employment level until 2016, lagging the nations recoveryby two years.

CONTRIBUTION OF UNCONVENTIONAL OIL AND GASNew Mexicos crude oil, which occurs primarily in the Permian Basin, represents just over 3% of theannual US total output. The state has three oil refineries, and several petroleum pipelines connecting therefineries to area markets. New Mexico is also the fifth-largest natural gas-producing state in the country,and its output accounts for around to one-twentieth of US production at 3.7 bcf/day. Although natural gasproduction declined through much of the 1980s, output has increased sharply since the early 1990s duein large part to the rapid development of coal bed methane in the San Juan Basin. Today, coal bedmethane production the production of unconventional natural gas from coal seams -- accounts for aboutone-third of New Mexicos natural gas production but is declining due to lower-performing wells. Althoughmore than two-thirds of US households use natural gas as their primary energy source for home heating,

the state's small population consumes less than one-tenth of New Mexicos natural gas production. Themajority of New Mexicos supply is delivered via pipeline to markets on the West Coast, and to markethubs in West Texas that supply the Midwest. Unconventional oil production from plays such as BoneSpring, located in the Permian Basin, may help to offset some of the declines in gas production from theSan Juan Basin.

The economic activity associated with unconventional oil and gas directly and indirectly supported 23,600jobs in the state in 2012.7 The states unconventional oil and gas-related employment is expected to morethan double to 58,000 jobs by 2035, or 5.1% of the state labor force, helping to reduce unemploymentand create a strong source of payroll growth for the next two decades.

Unconventional gas activity contributed value-added economic activity of $2.7 billion in New Mexico in2012. We forecast that this contribution will grow to $6.8 billion by 2035. As for labor income, the averageannual wage in New Mexico in 2012 is $51,000, while the average wage of direct jobs in unconventionalgas activity is $79,700, providing a significantly higher quality of life for state residents employed by the

industry.

There is also the contribution of unconventional gas employment to government revenues. In New Mexicoin 2012, it generated $1.5 billion in taxes for state and federal coffers. This includes $1 billion in state andlocal taxes, or the equivalent of more than 21% of the states $5 billion budget.



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Employment

(Number of workers)


2012 7,117 7,690 8,818 23,625

2020 7,262 9,950 12,637 29,8492035 16,787 19,172 22,508 58,466



2012 1,248 804 667 2,719

2020 1,398 1,134 1,015 3,547

2035 3,163 1,937 1,734 6,835



2012 567 481 375 1,423

2020 517 667 560 1,743

2035 1,282 1,162 924 3,369


($M)2012 2020 2035 2012-2035*

Federal Taxes 410 531 1,012 14,847

Personal Taxes 252 308 598 8,473Corporate Taxes 78 109 209 2,983

Federal Royalty Payments 53 89 165 2,667




Corporate Taxes 784 1,032 1,803 27,265









Contribution of T otal Unconventional Oil and Gas Activity to Gove rnment Re venue and Private Lease

Payments: New Mexico

New Mexico Economic Contribution Summary: Total Unconventional Oil and Gas Activity

NOTES:Numbers may not sum due to rounding.


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NORTH DAKOTA

OVERVIEWThe North Dakota economy continues to create jobs at a remarkable rate, thanks in large part to drilling

activity in the northwestern corner of the state. Unprecedented growth in employment, fueled by theenergy sector, has created a unique situation and placed pressure on a state labor market that is alreadythe tightest in the country. The Bakken shale formation is the locus of the economic boom: oil productionin the region has nearly quadrupled since 2005. Production in 2012 topped an astonishing 700 millionbarrels per day. Although the pace of job growth in the natural resources and mining sector has slowed abit in 2012 due to a decline in oil prices, the sectors job growth remains strong. A number of other sectorsare now benefitting from drilling activity in the Bakken, including construction, transportation andwarehousing, and manufacturing. Truckers, for example, are in high demand to transport materials into,and crude out of, the Bakken. The five-year outlook for North Dakotas total payrolls puts the state wellahead of the national average. North Dakotas small population and the oil sectors high wages haveresulted in an influx of workers from outside the state in search of well-paying jobs. Demand forconstruction and for manufactured goods has increased in the Bakken region to meet the housing,municipal and industrial infrastructure needs of rapid population gains and economic growth. The

population influx is a reversal from the period prior to 2006, when the Peace Garden State had generallyseen more annual out-migration than in-migration, as many young people left the state in search of bettereconomic opportunity. In-migration accelerated rapidly starting in 2008, and the Bakken is now a majordraw for workers from other states where unemployment remains stubbornly high. These new residentswith strong purchasing power also have positive impacts on the local and state economies.

CONTRIBUTION OF UNCONVENTIONAL OIL AND GASNorth Dakota is home to significant oil activity, much of it fairly new. It recently passed Alaska to becomethe second-ranked oil-producing state, behind Texas. Production is expected to rise above 1.2 millionbarrels per day by the end of this decade as the Bakken play continues to be developed at a rapid rate.While drilling and production within the Bakken is expected to ramp up quickly, IHS expects thatproduction will peak in 2021, and thereafter will begin a steady decline without advances in drillingtechnologies, downspacing, or new discoveries as available drilling locations are exploited. This decline indrilling will ultimately begin to affect capital expenditure and employment. Currently, the only natural gasproduction is associated gas which results from the oil plays. In addition to the direct jobs, employment isalso being created in the supplier networks and trade flows and from the income effects of earningsrelated to unconventional oil and gas. The economic activity associated with unconventional drillingdirectly and indirectly supported over 71,800 jobs in the state in 2012. 8 Many of these jobs are in theconstruction, fabricated metals manufacturing, and machinery manufacturing sectors.

The states unconventional oil and gas-related employment is expected to increase to over 114,000 jobsby 2020, which equates to 5.8% average annual growth. This growth compares to a 2.1% in the statesmanufacturing sector and 1.6% overall state job growth during the same time period. After this period, wewill begin to see declines in employment through 2035. These jobs would employ a significant portion ofthe state labor force, helping to reduce unemployment and creating a steady source of payroll growth forthe next two decades.

Unconventional oil and gas activity contributed value-added economic activity of $6.8 billion in NorthDakota in 2012. We forecast that this contribution will grow to just over $13 billion in 2020, before taperingoff to $6.3 billion by 2035. As for labor income, the average annual wage in North Dakota in 2012 is$64,600, while the average wage of direct jobs in unconventional oil and gas activity is $67,400. These

jobs have vastly improved the quality of life for many state residents employed by the industry.

8 Direct jobs are those created at the firms that comprise the oil and gas industry, or by the capital expenditures of related industries;indirect jobs are those created by suppliers of goods and services to industry. Induced jobs are those that meet the new demand forconsumer goods created by the increased income generated by the direct and indirect jobs.


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There is also the contribution of unconventional gas employment to government revenues. In NorthDakota in 2012, it will generate nearly $5.7 billion in taxes for state and federal coffers. This includesalmost $4 billion in state and local taxes, which will allow the state to enjoy continued record-settingbudget surpluses this year and in the near future.

Finally, it should be noted that these forecasts assume that the Bakken and Three Forks formations aredeveloped in North Dakota using current technology. Other North Dakota shales and petroleum sourcerocks exist, but these were not evaluated in this report. If other formations are developed, North Dakotaemployment, value added and government revenues are likely to be higher, especially in the later yearsof the forecast. In the Bakken and Three Forks formations, future advances in drilling and completiontechnology and downspacing could extend or increase production and investment in the latter part of theforecast thus increasing their economic impact.


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2012 19,746 24,099 27,978 71,824

2020 30,813 38,750 44,677 114,2402035 14,516 19,618 23,132 57,267



2012 2,918 2,284 1,605 6,808

2020 6,252 3,866 2,928 13,046

2035 3,069 2,003 1,559 6,630



2012 1,331 1,322 956 3,609

2020 5,856 2,185 1,545 9,586

2035 2,938 1,131 826 4,896


($M)2012 2020 2035 2012-2035*

Federal Taxes 1,812 3,688 1,958 72,392

Personal Taxes 640 1,693 870 31,977


Federal Royalty Payments 905 1,703 955 34,655

Federal Bonus Payments 74 83 28 1,627




Severance Taxes 1,396 2,579 1,421 52,315

Ad Valorem Taxes 1,055 1,939 1,062 39,302







Contribution of Total Unconventional Oil and Gas Activity to Gove rnment Revenue and Private Lease

Payments: North Dakota

North Dakota Economic Contribution Summary: Total Unconventional Oil and Gas Activity



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OHIO

OVERVIEWThe recovery in Ohios labor market continued in 2012, thanks to consistent expansions in finance,

professional-business, and education-health services. The manufacturing sector is also now in anexpansion mode and the construction sector has been on an upward trajectory. The labor market builtmomentum in 2012, but prospects for 2013 are not quite as rosy, as job growth will decelerate as gains inthe manufacturing sector wane. Over the next five years, Ohios recovery will be moderate, though still awelcome turnaround from the 20012010 decade, when employment lost an average 1.1% annually. Themanufacturing sector, a key factor in the decade of losses, will be a primary force behind economicgrowth over the medium-term, thanks to resurgent automobile and metal manufacturing sectors, andexpected growth in unconventional oil and gas jobs related to the Utica shale. This increasedmanufacturing activity will provide a stimulus for the transportation and warehousing sector, as moregoods flow through the state. That, combined with robust export activity, will keep job growth strong in thetransportation and warehousing sector over the next five years. The service sectors, however, remain thekey to long-term economic expansion. Professional-business and education-health services will be two ofthe fastest-growing sectors during 20122017. The state has been aggressively expanding its healthcare

industry, which is a source of stable and high-paying jobs, and given the aging demographics this will beone of the most consistent performing sectors. On the whole, job growth will average 1.3% annually overthe next five years, much better than in recent history, though below the national average.

CONTRIBUTION OF UNCONVENTIONAL OIL AND GASSitting on the promising Utica shale formation, Ohios unconventional oil and gas industry has muchpotential. While Uticas development is in the early stages, leasing and exploration activity have rampedup in recent years. Recent well test results have been highly encouraging. Furthermore, the extent of theplay is vast, covering as much as one-half of the states land area. In 2011 Chesapeake Energy, a majorshale gas player in the state, announced that it spent more than $1 billion on exploration and productionin Ohio and paid more than $650 million to land and mineral rights owners. The company also announcedplans to increase rig counts in the coming years. Consequently, IHS forecasts substantial increases inproduction of oil and gas and related activity. More transport and processing infrastructure will be needed

to fully develop the play, but delays in infrastructure could slow development. This oil and gas activity notonly directly creates jobs and income but it also creates work for auxiliary industries, includingmanufacturing. Recent developments include Vallourec & Mannesmann Holdings building a new steelplant in Youngstown to supply steel tubes used in drilling for oil and gas formations; U.S. Steel Corpexpanding and upgrading its plant in Lorain; and Timken Co. upgrading its Canton plant to accommodateadditional business related to drilling. Ohio, with its large industrial base and proximity to promisingreserves, is poised to gain further by producing the heavy metal and machinery required to performunconventional drilling.

In additional to manufacturing, gas drilling supports jobs in the transportation, construction, andprofessional, scientific and technical sectors. Currently, unconventional drilling employment supports38,000 jobs.9 That is expected to balloon to 143,000 by 2020 and to 266,000 by 2035. These jobs wouldemploy 4.3% of the state labor force by 2035, helping to reduce unemployment and creating a steadysource of payroll growth for the next two decades.

Unconventional gas activity contributed value-added economic activity of $4.1 billion in Ohio in 2012. Weforecast that this contribution will grow to $35.2 billion by 2035. As for labor income, the average annualwage in Ohio in 2012 is almost $55,000, while the average wage of direct jobs in unconventional gasactivity is $81,000, providing a sizable economic boost.



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There is also the contribution of unconventional gas employment to government revenues. In Ohio in2012, it generated nearly $1.5 billion in taxes for state and federal coffers. This includes over $910 millionin state and local taxes, or the equivalent of about 3.6% of the states $25 billion in 2011 revenues.


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Employment(Number of w orkers)


2012 4,210 13,601 21,020 38,830

2020 38,728 41,849 63,018 143,5952035 77,647 77,318 111,659 266,624



2012 611 1,574 1,918 4,103

2020 8,243 4,553 5,164 17,960

2035 18,337 8,105 8,850 35,292



2012 341 1,021 1,116 2,478

2020 3,278 2,905 2,979 9,162

2035 7,738 5,151 4,973 17,862


($M)2012 2020 2035 2012-2035*

Federal Taxes 537 2,150 4,218 57,681

Personal Taxes 439 1,619 3,168 43,440Corporate Taxes 98 530 1,050 14,241



State and Local Taxes 911 4,594 8,453 120,275

Personal Taxes 164 573 915 14,175

Corporate Taxes 738 3,789 6,841 97,967







NOTES: *2012-2035 repres ents the total for all years including those years not reported.


Contribution of T otal Unconventional Oil and Gas Activity to Gove rnment Revenue and Private Lease

Payments: Ohio

Ohio Economic Contribution Summary: Total Unconventional Oil and Gas Activity

NOTES: Numbers m ay not sum due to rounding.


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OKLAHOMA

OVERVIEWPowered by a strong energy sector, Oklahoma's economy has created jobs at an impressive rate in 2012.

In fact, Oklahoma's recent economic progress has placed it among the best-performing states in thecountry. Much of Oklahoma's economic advancement can be attributed to the state's abundance of oiland natural gas. With new projects underway by Southwest Energy Pool and TransCanada, the energyindustry will remain a key component of Oklahoma's economy for the next several years. Most of thestate's other private industries made significant progress over 2012 as well, notably manufacturing andprofessional-business services. Oklahomas services industries have benefited from firms' decisions torelocate their administrative activities to the state, and many more have plans to do so.

The recent growth in payrolls helped reduce the unemployment rate, despite a large increase in the laborforce. This suggests that the reduction in the jobless rate coincided with hiring, rather than discouragedworkers dropping out of the labor force. Oklahoma's recovery is well ahead of the US recovery the statehas already regained nearly all of the jobs lost during the recession. Looking ahead, employment willclimb at an average annual rate of 1.6% from 2012-2017. Some of the largest job gains will come in the

construction sector, as the real estate market recovers and housing starts pick up. The professional-business services sector will be another engine of growth. Oklahoma's relatively low wages and operatingcosts, convenient and central location, and business-friendly tax laws make the state an attractive placeto do business. The energy sector will continue to be a boon to the state. We expect jobs inunconventional oil and gas alone to double during the forecast period. As employment picks up,Oklahoma's unemployment rate will decline steadily, dipping below 4% by 2016.

CONTRIBUTION OF UNCONVENTIONAL OIL AND GASOklahoma is a strong producer of oil and both shale and tight gas. The state produced 225,000 barrels ofcrude oil per day in August 2012, according to the Energy Information Administration (EIA), makingOklahoma the fifth-largest producer of crude oil in the United States, behind Texas, North Dakota,California, and Alaska. The state is the fourth-largest producer of natural gas at 5.5 bcf/day according tothe EIA.

While conventional oil has been Oklahomas mainstay for decades, the emerging Mississippian Lime tightoil play spanning the northern third of the state is being aggressively developed. Another important play,the Granite Wash straddling the Oklahoma-Texas border in the panhandle area, is an example of howhorizontal drilling has transformed a dying tight sand play into one of the premier plays in North America.

Aggressive development will continue in this liquids-rich gas play and in some adjacent, smaller nearbytight oil plays such as the Cleveland and Tonkawa. Additional infrastructure will be required to processthe abundant natural gas liquids from the play, providing additional opportunities for employment growth.Two areas of the Woodford Shale development will continue to contribute to gas production. While theseareas are not projected to be as massive as the Granite Wash, they will nonetheless contribute toemployment growth.

The economic activity associated with unconventional oil and gas directly and indirectly supported over65,000 jobs in Oklahoma in 2012.10 This number represents almost 4% of the states total nonfarm

employment. The unconventional oil- and gas-related employment is expected to increase to 150,000 by2020 and to 225,000 by 2035. These jobs would employ 11.1% of the state labor force by 2035, helpingto reduce unemployment and creating a steady source of payroll growth for the next two decades.

Unconventional oil and gas activity contributed value-added economic activity of $8.9 billion in Oklahomain 2012. We forecast that this contribution will grow to $38 billion by 2035. As for labor income, the



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average annual wage in Oklahoma in 2012 is $52,200, while the average wage of direct jobs inunconventional oil and gas activity is significantly higher at $108,600, providing a solid quality of life forstate residents employed by the industry.

Unconventional oil and gas activity is a major source of government revenues in Oklahoma. In 2012, itgenerated over $2.4 billion in taxes for state and federal coffers. This includes $1.3 billion in state andlocal taxes, or the equivalent of about 17.5% of the states $7.8 billion dollar budget for 2012. Taxrevenues generated by unconventional oil and gas activity would help the state significantly reduce itscurrent budget deficit.


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2012 21,137 18,821 25,367 65,325

2020 49,258 42,186 58,173 149,6172035 72,558 64,495 88,334 225,387



2012 5,032 2,085 1,793 8,911

2020 15,326 4,778 4,349 24,454

2035 24,363 7,161 6,538 38,061



2012 2,296 1,146 1,004 4,447

2020 6,191 2,575 2,264 11,030

2035 9,968 3,885 3,392 17,245

Source: IHS Global Ins ight

($M)2012 2020 2035 2012-2035*

Federal Taxes 1,069 2,794 4,370 69,919

Personal Taxes 788 1,950 3,058 48,822Corporate Taxes 269 809 1,254 20,114





Corporate Taxes 814 2,358 3,294 56,497

Severance Taxes 247 1,041 2,163 30,657







Source: IHS Global Ins ight

Contribution of Total Unconventional Oil and Gas Activity to Government Rev enue and Private Lease

Payments: Oklahoma

Oklahoma Economic Contribution Summary: Total Unconventional Oil and Gas Activity

NOTES: Numbers m ay not sum due to rounding.


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PENNSYLVANIA

OVERVIEWIn 2012, employment in the natural resources and mining sector has leveled off and remained steady

after two years of double-digit growth. The adoption of hydraulic fracturing in Pennsylvania was the maindriver of double digit job growth in Pennsylvania in 2010 and 2011, providing a bulwark against deeprecession at a time when many other sectors of the state economy were struggling. Payrolls in the sectorremained stable in 2012. The state is moving to take advantage of the long-term potential of its vastnatural resources in a variety of ways, from a proposed ethylene cracker in western Pennsylvania toexports of natural gas liquids from ports along the Delaware River. Pipelines continue to be built to movethe gas to where it has the most value, such as the Northeasts US home heating market. Demand formetallurgical coal and its derivatives remain robust, both domestically and overseas. ArcelorMittal willinvest $50 million to retool its Monesson coke plant and restart it in 2014. The renovation will result inconstruction and other jobs in the interim.

Pennsylvania's economy is expected to add jobs at a 1.2% average annual rate between 2012 and 2017.This growth rate would rank Pennsylvania in the bottom tier of the states, due to a couple of factors. First,although the state certainly lost plenty of jobs to the recession, the magnitude was less than in manyother states. As a result, Pennsylvanias employment growth is not expected to snap back as much as itwill in states like Florida and Arizona. Second, Pennsylvania's population growth is expected to remainbelow the national average, limiting its potential job growth, especially in the service sectors.Pennsylvania will return to its pre-recession peak employment level near the end of 2013. Developmentof natural gas in the Marcellus Shale formation under much of Pennsylvania continues to dominate theeconomic outlook there, especially in the longer term..

CONTRIBUTION OF UNCONVENTIONAL OIL AND GASPennsylvanias petroleum industry got its start in the mid-19 th century, with the first oil well near Titusville.In the 20th century, the state played a much smaller role in the national oil and gas industry, but the recentdevelopment of its massive, world-class Marcellus Shale play, using horizontal drilling and hydraulicfracturing, has re-elevated the state into prominence in the energy industry. More transport andprocessing infrastructure will be needed to fully develop the play, and delays in infrastructure could slow

development, but the vast Marcellus play covering about 60% of the state has enormous resourcepotential.

The Utica shale gas play is located primarily in the neighboring state of Ohio, but it extends into westernPennsylvania and will contribute to Pennsylvanias economy in the future. In addition, supplier networks,trade flows and income effects from earnings related to unconventional gas also create significantemployment here, helping to knock the rust off of part of the Rust Belt industries that have historicallybeen prominent in the states economy. The economic activity associated with unconventional gas willdirectly and indirectly supported nearly 103,000 jobs in the state in 2012, especially in the drilling andcompletion and steel and metal fabrication manufacturing sectors. 11 These two sectors accounted for22% of the states total manufacturing jobs in 2012.

The states unconventional gas-related employment is expected to more than double to nearly 221,000 by

2020 and grow to 387,000 by 2035. These jobs would employ 5.6% of the state labor force by 2035,helping to reduce unemployment and creating a steady source of payroll growth for the next two decades.

Unconventional gas activity contributed value-added economic activity of over $14 billion in Pennsylvaniain 2012. We forecast that this contribution will grow to just over $49.0 billion by 2035. As for labor income,

11 Direct jobs are those created by firms that comprise the oil and gas industry, or by the capi

Americas New Energy Future State Highlights Dec2012

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